1. Energy Markets and Projections
For
National Governors Association
Governors’ Advisors Energy Policy Institute
July 24, 2014 | Washington, DC By
Adam Sieminski, EIA Administrator

2. Market impacts from increased oil and natural gas production
NGA Governors' Advisors Energy Policy Institute July 24, 2014

3. The U.S. has experienced a rapid increase in natural gas and oil production from shale and other tight resources
Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through June 2014 and represent EIA’s official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s).
NGA Governors' Advisors Energy Policy Institute July 24, 2014

4. U.S. is the largest producer of petroleum and natural gas in the world
estimated U.S., Russia, and Saudi Arabia petroleum and natural gas production
quadrillion Btu
million barrels per day of oil equivalent
United States
Russia
Saudi Arabia
natural
gas
petro-leum
2008
2009
2010
2011
2012
2013
2014e
Source: U.S. Energy Information Administration
Note: Petroleum production includes crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids, including biofuels; barrels per day oil equivalent were calculated using a conversion factor of 1 barrel oil equivalent=5.55 million British thermal units (Btu)
NGA Governors' Advisors Energy Policy Institute July 24, 2014

5. Natural gas surpasses coal as the largest generation source more quickly under high oil and gas resource assumptions
billion kilowatthours
2012
History
Projections
coal
natural gas
Source: Annual Energy Outlook 2014 Early Release and Preliminary side cases
NGA Governors' Advisors Energy Policy Institute July 24, 2014

6. Implications of zero/low electricity demand growth
NGA Governors' Advisors Energy Policy Institute July 24, 2014

7. In EIA’s AEO2014 Reference Case, growth in electricity use slows, but still increases by 29% from 2012 to 2040
percent growth
(3-year compounded annual growth rate)
Annual Growth
Period Electricity use GDP
1950s
1960s
1970s
1980s
1990s
2012
History
Structural Change in Economy - Higher prices - Standards - Improved efficiency
electricity use
Projections
GDP
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute
July 24, 2014

8. More fossil capacity is retired in the Low Growth case
U.S. electric power sector capacity retirements
gigawatts (cumulative)
Reference case
Low Growth case
Coal
Natural Gas/Oil
Nuclear
Renewable / Other
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute July 24, 2014

9. Capacity additions decline dramatically in the Low Growth case
U.S. electricity generation capacity additions
gigawatts
2012
Reference case
Projections
History
2012
History
Projections
Low Growth case
Capacity under construction is still assumed completed
Projected renewable builds primarily occur in the buildings sector, power sector builds are much lower and are primarily natural gas-fired
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute July 24, 2014

10. Projected end-use electricity prices are lower in the Low Growth case
Average end-use electricity price, all sectors
2012 cents per kilowatthour
2012
History
Projections
Reference case
Low Growth case
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute July 24, 2014

11. Findings from EIA’s updated Commercial Buildings Energy Consumption Survey (CBECS)
NGA Governors' Advisors Energy Policy Institute July 24, 2014

12. The CBECS building population is diverse and smaller building types are the most common
NGA Governors' Advisors Energy Policy Institute July 24, 2014

13. New commercial buildings are larger, on average, than old commercial buildings
NGA Governors' Advisors Energy Policy Institute July 24, 2014

14. Buildings over 100,000 square feet make up only about 2% of the building count but about 35% of the total floorspace
NGA Governors' Advisors Energy Policy Institute July 24, 2014

15. About half the building types show an increase in the number of buildings from 2003 to 2012
Warehouse and storage (*)
Mercantile
NGA Governors' Advisors Energy Policy Institute July 24, 2014

16. Growth scenarios for renewables
NGA Governors' Advisors Energy Policy Institute July 24, 2014

17. Crude oil and natural gas plant liquids
U.S. production grows rapidly, particularly natural gas, renewables, and liquids in the near term
U.S. energy production
quadrillion Btu
History
Projections
2012
2025
2040
34%
38%
31%
Natural gas
11%
12%
Renewables
11%
23%
22%
Coal
26% 8% 8%
Nuclear
10%
24%
20%
Crude oil and natural gas plant liquids
21%
Source: EIA, Annual Energy Outlook 2014 Early Release
NGA Governors' Advisors Energy Policy Institute July 24, 2014

18. What do EIA’s Annual Energy Outlook 2014 projections say about the role of renewable electricity in the generation mix?
Net generation by fuel source in the AEO2014 Reference case
billion kilowatthours
non-hydro renewables
hydropower
petroleum and other
nuclear
natural gas
coal
Source: EIA, Annual Energy Outlook
NGA Governors' Advisors Energy Policy Institute July 24, 2014

19. Projected renewable generation market shares vary significantly under alternative assumptions
Renewable share of electricity generation in eight cases
billion kilowatthours
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute July 24, 2014

20. Uncertainty in renewable projections is skewed to the upside of the Reference case
U.S. non-hydro renewable electricity generation in eight cases ( )
billion kilowatthours
Source: EIA, Annual Energy Outlook 2014
NGA Governors' Advisors Energy Policy Institute July 24, 2014

21. How EIA helps to provide information on current energy issues
NGA Governors' Advisors Energy Policy Institute July 24, 2014

22. Crude exports
The United States exported 268,000 barrels per day (b/d) of crude oil in April (the latest data available from the U.S. Census Bureau), the highest level of exports in 15 years. Exports have increased sharply since the start of 2013 and have exceeded 200,000 b/d in five of the past six months. The increase in crude exports is largely the result of rising U.S. crude production, which was 8.2 million b/d in March.
NGA Governors' Advisors Energy Policy Institute July 24, 2014

23. Biofuels
On November 15, 2013, the Environmental Protection Agency (EPA) released its Notice of Proposed Rulemaking for the 2014 Renewable Fuels Standard (RFS). The RFS program, established by the Energy Policy Act of 2005 and later expanded by the Energy Independence and Security Act of 2007 (EISA07), requires EPA to set annual requirements for the renewable content of liquid fuels that may differ from a set of targets specified by law. The U.S. Energy Information Administration is required by the RFS provisions in EISA07 to provide EPA with information related to the projected use of motor gasoline and diesel fuel and the supply of various categories of biofuels in the month prior to issuance of EPA's final RFS rulemaking for each program year.
NGA Governors' Advisors Energy Policy Institute July 24, 2014

24. Propane
Propane is produced from natural gas at processing plants and from crude oil at refineries. Propane produced from natural gas has been the fastest-growing component of overall U.S. propane supply. Propane production in the United States has set record highs on an almost weekly basis in 2013 as a result of increased oil and natural gas drilling. A record corn crop harvest has increased the demand for propane (shown in the graph above as product supplied) in the central United States. Expanded propane production met this agricultural demand, while continuing to supply other markets.
NGA Governors' Advisors Energy Policy Institute July 24, 2014

25. EIA data and market reports on propane, heating oil, biofuels, oil and natural gas
Propane, Heating Oil, Gasoline and Diesel
Weekly Petroleum Status Report and This Week in Petroleum
State Heating Oil and Propane Program (SHOPP)
Heating Oil and Propane Update (October – March)
EIA will be reporting propane inventory data in the Midwest below the PADD level, by single state where possible. In addition to posting weekly stocks data on the website, EIA will communicate directly with Governors’ designees when stocks are below the five year average for three consecutive weeks.
Ethanol and Biodiesel
Ethanol production and refiner/blender inputs
Biodiesel Monthly Biodiesel Production Report
Trade imports and exports of biofuel/renewable fuel
Crude Oil and Refined Product Trade
Crude Oil and Refined Product Imports and Exports
Natural Gas Trade
Natural Gas – Imports and Exports by Pipeline and as LNG
DOE Office of Fossil Energy handles natural gas export applications
NGA Governors' Advisors Energy Policy Institute July 24, 2014

26. For more information
U.S. Energy Information Administration home page |
Annual Energy Outlook |
Short-Term Energy Outlook |
International Energy Outlook |
Monthly Energy Review |
Today in Energy |
State Energy Portal |
Drilling Productivity Report |
NGA Governors' Advisors Energy Policy Institute July 24, 2014

27. Supplementary slides
NGA Governors' Advisors Energy Policy Institute July 24, 2014

28. EIA Analysis on Crude Oil Markets
Work is underway on the following aspects of relevance to policymakers:
changes in pipeline systems to accommodate changing crude and product flows and movements of oil by rail
refinery utilization by crude type and downstream investment options to accommodate a changing production mix
the relationships linking crude prices to refined product prices and product prices across different trading hubs
EIA released its first forecast of oil production by crude type
EIA has also proposed the expansion of an existing monthly natural gas production survey to include crude oil and condensate by gravity
NGA Governors' Advisors Energy Policy Institute July 24, 2014

29. CBECS provides essential, unique information
The CBECS is the only independent, statistically representative source of national-level data on the characteristics and energy use of commercial buildings*
Mandated by Congress, it has been conducted periodically since ; this is the first reported data since the 2003 survey; the survey did not provide valid results
CBECS data are the backbone of the Energy Star ratings at EPA, and are used by EERE for a variety of programs
The 2012 CBECS is in its final stage of data collection; EIA is gathering usage data from energy providers across the country
This briefing provides initial data about building characteristics; consumption and expenditures data will be available next year
Since 2007, CBECS also collects water usage information
*Commercial buildings must contain 50 percent or more commercial activity (i.e., not residential, industrial, or agricultural) and be larger than 1,000 ft2
NGA Governors' Advisors Energy Policy Institute July 24, 2014

30. AEO2014 projects more coal-fired power plant retirements by 2016 than have been scheduled
U.S. coal plants under economic pressure - low natural gas prices , slow electricity demand growth
The Annual Energy Outlook 2014 (AEO2014) Reference Case projects that 60 GW will retire by 2020 (including retirements that have already been reported); retirement decisions based on relative economics and regulatory environment of electricity markets
Coal plants are subject to the Mercury and Air Toxics Standards (MATS)
requires significant reduction in mercury, acid gases, and toxic metals emissions
scheduled to take effect in April 2015, or April 2016 with extensions
90% of retirements are projected to occur by the first full year of MATS enforcement
MATS compliance - all coal plants must have flue gas desulfurization equipment (scrubbers) or dry sorbent injection systems installed by 2016
End of 2012: 1,308 coal units, 310 GW (after 10.2 GW retirements = 3.2% of the 2011 total)
NGA Governors' Advisors Energy Policy Institute July 24, 2014

31. Key takeaways on coal/natural gas substitution in power generation
Coal-to-gas switching in recent years has been driven by lower natural gas prices resulting from rapid growth in shale gas production, inflexible coal prices, and high availability of generating capacity given stagnant electricity demand
At the national level, April 2012 marked a milestone: gas-fired and coal-fired electric power generation levels were identical for the first time ever.
The intensity of gas-on-coal competition varies by region depending on relative delivered fuel prices, the available capacity mix and its utilization, and the status of coal contracts; the Southeast region saw the most switching towards dispatch of gas-fired units in 2012
In the AEO Reference case, factors such as MATS compliance, stagnant nuclear capacity growth, and increased generation from renewables contribute to natural gas overtaking coal as the leading fuel for electric power generation on an annual basis by 2035; the projected crossover comes much sooner, almost immediately, in cases with different assumptions about resources or policies
Given the fuel prices projected in the AEO Reference case, existing coal units that are not retired for MATS compliance are projected to be fully utilized. In scenarios with lower relative gas prices, coal-to-gas switching reduces projected coal generation in some regions. While scenarios with higher relative gas prices increase projected reliance on renewables and nuclear, they do not appreciably increase projected coal-fired generation from Reference case levels.
NGA Governors' Advisors Energy Policy Institute July 24, 2014

32. What might a low electricity demand growth future look like?
Assumptions used to achieve low electricity demand growth:
Applied best available technology to buildings, and layered on greater industrial motor efficiency
Assumptions are technically achievable but not necessarily cost-effective at this time
Shifts in demand are accompanied by changes in patterns of investment and prices
Consumers spend less for electricity, and utility bill savings nearly balance households’ increased costs for more efficient equipment, insulation, etc.
From , electricity generation capacity additions decline by about 50% relative to the AEO2014 Reference case, while retirements of fossil fuel-fired capacity more than double relative to the AEO2014 Reference case
Lower marginal energy prices in competitive wholesale electricity markets, relative to the AEO2014 Reference case
Declines in residential electricity generation prices are partially offset by near-term increases in transmission and distribution prices
NGA Governors' Advisors Energy Policy Institute July 24, 2014

33. Relevant AEO2014 side cases
TheAEO2014 includes an analysis of renewable projections by varying key assumptions, including policy
Key uncertainties
Relevant AEO2014 side cases
Technology uncertainty
How much will it cost to build and operate a renewable generation facility?
Low Renewable Technology Cost
Policy Uncertainty
Will current policies be extended?
Will new policies be enacted?
No Sunset
GHG25
Macroeconomic and Price Uncertainty
Will natural gas prices increase more than currently projected in the Reference case?
Could the economy (GDP) grow faster or slower than the average of 2.4% per year assumed in the Reference case?
High/Low Oil and Gas Resource
High/Low Macroeconomic Growth
NGA Governors' Advisors Energy Policy Institute July 24, 2014

34. Expanded EIA-914 proposal
Current oil and gas production data is necessary to address questions about the very rapid changes occurring in quantity and quality of domestic output
Collect monthly data on oil and natural gas production and associated API gravity from operators in 19 states and Federal GOM
Anticipated benefits of 914 expansion
Improves EIA’s reporting: timeliness, transparency, coverage (more states), informs upstream discussions/analyses, reduces estimation errors in statistical models
Respondent burden expected to be modest: roughly 500 respondents out of a 10,000-12,000 producer universe; electronic (web portal) interface
Inadequacy of existing tools
GWPC National Gateway, even with EIA help, is still subject to the same state lags and consistency limitations
EIA Drilling Productivity Report (DPR) is an estimate based on a set of assumptions, not a survey of actual production trends
NGA Governors' Advisors Energy Policy Institute July 24, 2014

35. EIA-914 expansion will add 20 states/areas to oil and 14 states to current coverage of natural gas
Lower 48 states expanded survey coverage:
Natural gas: 92%
Oil: 89%
NGA Governors' Advisors Energy Policy Institute July 24, 2014

36. EIA product highlight: State Energy Portal
EIA’s State Energy Portal gives users detailed portraits of energy production, consumption, and energy prices at the state level
The State Energy Portal features almost 90 key data series, state Quick Facts, and charts for each state
State Energy Portal
NGA Governors' Advisors Energy Policy Institute July 24, 2014

37. EIA adjusts social media tools to meet state needs
NGA Governors' Advisors Energy Policy Institute July 24, 2014